European Union lawmakers have voted to impose strict capital requirements on banks that hold cryptocurrencies, per a Reuters article.
In an effort to “prevent the instability of the crypto world from spilling over into the financial system,” Markus Ferber, economic spokesman for the European People’s Party of the EU parliament, said, “banks will be required to hold euros from their own capital for each euro. they hold crypto.”
Lawmakers cited the chaos in the market seen over the past few months as further evidence that regulation is necessary. With events like the collapse of FTX, Celsius and others fresh in the minds of users, this legislation is anticipated to be part of a larger regulation aimed at bringing the EU into line with international norms.
The implemented regulations mirror those recommended by the Basel Committee of the Bank for International Settlements, which also recommended the highest level of risk weighting for holdings of “unsupported crypto.” The recommendation places a 2% limit on tier 1 capital that can be held in unsupported cryptocurrencies.
“There is no definition of crypto assets in it [legislation] and therefore the requirement can be applied to tokenized securities, as well as non-traditional crypto assets targeted for interim treatment,” the Association for Financial Markets in Europe (AFME), an EU lobby group representing financial organizations such as investment banks said, indicating that the current legal form it may not be obvious, but the concept problem can be fixed later.
When the Economic and Monetary Affairs Committee of the European Parliament voted to approve these measures, in order to be fully applicable, they must also be approved by the European Parliament as a whole, and presented to the meeting of national finance ministers in the Council. from the European Union.